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[2018] ZAFSHC 173
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First Rand Bank Ltd v Van der Walt (Cargill RSA (Pty) Ltd intervening) (4918/2017) [2018] ZAFSHC 173 (27 November 2018)
IN
THE HIGH COURT OF SOUTH AFRICA,
FREE
STATE DIVISION, BLOEMFONTEIN
Case
number: 4918/2017
In
the matter between:
FIRST
RAND BANK
LTD
Applicant
and
SAREL JACOBUS VAN
DER WALT
Respondent
CARGILL RSA (PTY)
LTD
(Intervening
creditor)
CORAM:
DAFFUE, J
HEARD
ON:
01
NOVEMBER 2018
JUDGMENT
BY:
DAFFUE,
J
DELIVERED
ON:
27
NOVEMBER 2018
I
INTRODUCTION
[1]
The continuous drought has seriously impacted on several regions of
South Africa and in particular some areas within the jurisdiction
of
the Free State Division of the High Court. It is apparent from
our court rolls that sequestration applications are on
the increase
and even macro businesses and farming enterprises are affected.
[2]
The respondent in these sequestration proceedings was a
well-established and affluent farmer who conducted his farming
activities
on an enormous scale. He might well have been, as
suggested by him, one of the largest maize farmers in the Free State.
[3]
I used the past tense in paragraph [2]. The respondent was
provisionally sequestrated more than a year ago and it is now my
task
to adjudicate whether or not a final sequestration order should be
issued.
II
THE
PARTIES
[4]
Applicant is FirstRand Bank Ltd (“FNB”), a public company
and registered commercial bank and credit provider, trading
inter
alia
as
RMB and FNB. Adv M A Badenhorst SC appeared on behalf of FNB
before me.
[5]
Respondent is Mr Sarel Johannes van der Walt (“respondent”),
a major male person married out of community of property.
He
was represented by Advv D B du Preez SC and U Lottering.
[6]
The intervening creditor is Cargill RSA (Pty) Ltd (“Cargill”),
a private company and registered credit provider.
It was
represented by Adv P Zietsman SC.
III
THE
RULE
NISI
AND
EVENTS THEREAFTER
[7]
On 4 October 2017 a rule
nisi
was
issued by agreement in the following terms which I quote
verbatim
:
“
1. The estate of
the respondent, is placed under PROVISIONAL SEQUESTRATION in the
hands of the Master of the High Court.
2. A Provisional
Order is hereby issued calling upon the Respondent to show cause if
any, to the Court on the 27th day of
MARCH 2018 at 09:30 why a FINAL
ORDER of SEQUESTRATION should not be granted against Respondent’s
estate.
3. This order,
together with a copy of the Notice of Motion and annexure thereto
must be served on the
Respondent personally.
4. A copy of the
order must be served on:
4.1 Any registered
trade union that as far as the Sheriff can reasonably ascertain,
represents any of the employees of the
Respondent.
4.2 the
Respondent’s employees, if any, by affixing a copy of the order
and application to any notice board to which
the employees have
access inside the Respondent’s premises, or if there is no
access to the premises by the employees, by
affixing a copy to the
front gate, where applicable, failing which to the front door of the
premises from which the Respondent
conducted any business at the time
of the presentation of the application papers.
4.3 the South
African Revenue Services and .
4.4 The Masters of the
High Court.
5. The sheriff must
ascertain whether the employees of the respondent are represented by
a Trade Union and whether there is
a notice board on the premises to
which the employees have access.
6. The auction of
the movable and immovable property planned for 10 and 11 October 2017
is cancelled.
7. The costs of the
application will be costs in the sequestration.”
[8]
It should be pointed out that, contrary to the rule of practice in
this Division, the return date was not four weeks from the
date of
the rule nisi, but almost six months. More than ample time was
provided to respondent to get his finances in order
if that was at
all possible.
[9]
On 27 March 2018 the rule
nisi
was extended to 24 May 2018. Several further extensions
followed and eventually it was extended to 1 November 2018 when the
matter was heard by me.
[10]
On 22 April 2018 respondent filed his answering affidavit in order to
oppose the final sequestration of his estate.
[11]
On 18 May 2018 Cargill filed an application for leave to intervene
and on the same date the Master filed his report.
On 4 June the
provisional trustees filed a comprehensive report which was attached
to FNB’s replying affidavit filed on 13
June 2018.
[12]
Respondent filed his answering affidavit to Cargill’s founding
affidavit on 7 August 2018. He complained about
source
documents not produced by Cargill and simultaneously filed an
application to compel discovery in terms of rules 35(12) &
(14).
On receipt of Cargill’s response a supplementary affidavit was
filed by respondent on 27 September 2018.
[13]
FNB filed a supplementary affidavit in response to Cargill’s
papers on 21 September 2018. Cargill filed its replying
affidavit on 19 October 2018.
[14]
The parties did not agree that the supplementary affidavits may be
permitted as part of the record. FNB indicated when
it filed
its supplementary affidavit that the court’s leave would be
requested at the hearing of the application and respondent
was called
upon to respond thereto if he so wished. I ruled that the
parties should address me on the merits and permission
to filing of
the supplementary affidavits whereupon I shall deal with all aspects
in my judgment.
IV
THE
APPLICATION FOR LEAVE TO INTERVENE
[15]
As said, Cargill filed an application for leave to intervene to which
respondent responded with an answering affidavit
as well as a
supplementary answering affidavit upon Cargill’s filing of
documents sought by respondent in terms of rules
35(12) and (14).
Cargill also filed a replying affidavit.
[16]
It should be mentioned at this stage that respondent has not only
raised four points
in
limine,
but
also attacked Cargill’s application on the merits thereof.
It is in essence respondent’s defence that what
was owing to
Cargill has been settled. The evidence by the parties and
various arguments will be considered
infra.
[17]
The intervention of a creditor in sequestration proceedings is a
unique practice which differs from conventional intervention
and may
be described as a
sui
generis
procedure. Any creditor may intervene in sequestration
proceedings,
e.g
in order to apply for the discharge of a provisional sequestration
order, or where the original applicant for sequestration does
not
proceed or drags his feet, to obtain a fresh provisional order. If
the existing provisional sequestration order is discharged,
the
intervening creditor may apply for a fresh provisional sequestration
order and if a proper case has been made out, a rule
nisi
may be issued in his favour. Such intervening creditor may rely
on facts appearing from the original application. See:
Fullard
v Fullard
1979 (1) SA 368
(T) at 371H – 372C.
[18]
The court considering a sequestration application is entitled to also
consider the facts deposed to in the intervening application
in
coming to its conclusion. See:
Uys and another v Du Plessis
(Ferreira intervening)
2001 (3) SA 250
(C) at 251 I – 252D.
V
ISSUES
IN DISPUTE
[19]
The following issues are in dispute:
1) respondent’s
alleged insolvency;
2) the value of
respondent’s assets and in particular the alleged inadmissible
evidence relating to valuations as well as
the method of valuation
with reference to whether the forced sale or market values of the
immovable properties should be accepted;
3) the extent of
respondent’s liabilities;
4) Cargill’s claim
and therefore its
locus
standi
as creditor;
5) four points
in
limine
in respect of Cargill’s application to intervene to be
discussed briefly.
VI
MATERIAL
ISSUES NOT IN DISPUTE OR NOT SERIOUSLY CONTESTED
[20]
The following evidence is uncontested and/or not seriously contested:
1.) FNB is a creditor of
respondent in an amount of R75m plus interest and costs as surety for
Karis Boerdery together with the
amount of R11 999 547.95
plus interest and costs as surety for SRE Trust. The total
amount due and payable as surety
is therefore R87m plus interest at
the rate of 10.25%
per annum
from 1 September 2017 and costs.
2.) Respondent’s
farming operations have terminated on 4 October 2017, more than a
year ago.
3.) Respondent’s
previous employees, 53 in total, and contrary to respondent’s
version that he employed many more,
have been retrenched by the
provisional trustees with the consent of secured creditors. One
employee was not retrenched.
4.) Respondent’s
immovable properties were leased in November 2017 in respect of the
2017/2018 harvesting season for
R3.2m to the Luna trust of which his
wife is a trustee. This lease has been extended for another
year,
i.e.
for the 2018/2019 harvesting season.
5.) Respondent has
not farmed in his personal capacity and/or yield any income during
the last twelve months to settle his
debts and/or to make any offers,
meaningful or otherwise, towards the settlement of his debts.
6.) FNB’s
claims of about R87m plus interest from 1 September 2017 and costs
are not in dispute. This is clear
from respondent’s
answering affidavit, confirming in paragraph 8 the extent of his
liabilities (on his version) which includes
the FNB claims, as well
as his implied concession of the correctness of FNB’s
certificates of balances.
7.) On 23 August 2017,
and after Cargill established that respondent disposed of 8 800
tons of maize to the value of R13.8m
belonging to it, to third
parties, the parties entered into a written agreement wherein
respondent confirmed that he breached his
contract with Cargill by
disposing of maize to third parties and also admitted owing at that
stage some R26m to Cargill.
8.) Respondent
caused an advertisement to be published in a national magazine in
terms whereof his assets, inclusive of his
farms and movable assets,
would be sold by Park Village Auctions by public auction on 10 and 11
October 2017.
9.) Cargill
intended to bring an application against respondent on 5 October 2017
to
inter alia
perfect its notarial bond; however, FNB brought
an urgent application as a consequence of the advertised public
auction for the
provisional sequestration of respondent and obtained
an order by agreement on 4 October 2017. It should be mentioned
that
respondent is dissatisfied with the manner in which his previous
attorneys conceded to the granting of the order, but nothing turns
around this at this stage.
10.) Based on the
valuations of Mr Mulder, a valuer mandated by respondent and/or his
attorney/auctioneer, FNB made certain
calculations in order to prove
respondent’s insolvency. FNB decided to make use of the
valuer’s forced sale values,
although the valuer also
determined the market values. For purposes of the common cause
facts, it needs to be pointed out
that FNB relied on the forced sale
values of the movables in a total amount of R45 367 241.50
– the market value
was determined to be R69 416 313.00
– and this is the amount that respondent accepted as the basis
to show his
solvency. However, when respondent deposed to his
affidavit on 22 April 2018, it was already established in
co-operation
with his own attorney that the total value of movable
assets that remained, after a sale of some and removal of others by
secured
creditors such as Wesbank and Kempston, was a mere
R1 130 412.92. Several assets could not be accounted
for.
Respondent overvalued his movable assets by more than
R68m.
11.) Although Mulder’s
valuations of the immovable properties were criticised as will be
shown
infra
, respondent was quite prepared to use these to
show his solvency, but by referring to market value instead of forced
sale value.
The different calculations will be dealt with
infra.
12.) Although
Cargill’s claim is disputed, it is apparent that Cargill
provided much needed financial assistance to
respondent to enable him
to plant and eventually harvest the crop. Respondent admitted
his liability and he has to prove
that he has settled his debt.
13) In conclusion,
respondent as one of the largest maize farmers in the Free State
Province, has failed to settle his admitted
debt to his major
creditor, FNB, notwithstanding an effective moratorium of more than a
year.
VII
FILING
OF SUPPLEMENTARY AFFIDAVITS
[21]
The general rule is that in motion proceedings the applicant must
make out his case in the founding affidavit and that
new matter shall
not be introduced in the replying affidavit. This is not an
inflexible and/or absolute rule. In
Shepherd
v Mitchell Cotts Seafreight (SA) (Pty) Ltd
1984 (3) SA 202
(T) at 205E and further the full bench dealt with the
general rule, but stated, relying on
Kleynhans
v Van der Westhuizen NO
1970
(1) SA 565
(O) that it may be apposite to allow new matter in a
replying affidavit. This will
inter
alia
be
the case when it appears that
“
the
ramifications of respondent’s affairs were extensive and
complex, and that it was impossible for applicant to have all
the
facts fully at his disposal before he launched his application.”
[22]
At 206D –E the court in
Shepherd
found that there could not be any objection that material information
be placed before it by way of the provisional trustee’s
affidavit on the return date of a provisional sequestration order.
Although new matter is placed before the court in
such instance as
the trustee reports on what he has ascertained during the execution
of his statutory duties, it should be considered
insofar as it is
relevant to issues canvassed in the affidavits. Respondent was
fully entitled to respond thereto.
[23]
As mentioned, the court may in its discretion permit the filing of
further affidavits. See rule 6(5)(e) of the
Uniform Rules of
Court and
Hano
Trading CC v JR 209 Investments (Pty) Ltd
2013
(1) SA 161
(SCA) at para [10]. It is true that in the absence
of leave being granted by the court, parties are not allowed, even by
agreement, to file further affidavits. It is stated in
Hano
Trading
at
para [11] that the court hearing the application,
“…
as
arbiter, has the sole discretion whether to allow the affidavits or
not”
and
“…
will
only exercise its discretion in this regard where there is good
reason for doing so.”
[24]
In casu
the application for leave was not applied for in a
separate application preceding the return date of the provisional
order.
In my view it would be an unnecessary waste of time and
expense to follow such route, bearing in mind that the matter has
been
dragging on for over a year. Respondent was invited to
respond and cannot claim any prejudice if the further affidavit is
allowed. He decided to file an application for the striking out
of several paragraphs of the supplementary affidavit, but
elected to
respond in detail to the averments contained in the supplementary
affidavit. I am satisfied that FNB has made
out a proper case
for the admission of its supplementary affidavit. It mainly
relies on aspects emanating from Cargill’s
application to
intervene and FNB in essence merely wanted to put the record
straight. It also invited respondent timeously to respond
thereto
which he did. The application for striking out is dismissed.
Respondent’s supplementary affidavit in the intervening
application should also be allowed. In so doing, the full
factual matrix is before the court in order to properly consider
all
relevant aspects.
VIII
THE
PROVISIONAL TRUSTEES’ REPORTS
[25]
A detailed but unsigned report of the provisional trustees dated 31
May 2018 is relied upon by FNB. It is attached to
FNB’s
replying affidavit as annexure “RMB4”. The one
provisional trustee, Mr Cloete Murray, later on deposed
to an
affidavit confirming the correctness of this report. On 12
September 2018 the Master filed a further report to which
he attached
a supplementary trustees’ report, signed by Mr Murray, wherein
it is reported with the required proof that Absa
Bank intended to
file a claim in the amount of nearly R7.5m against the insolvent
estate. FNB referred to this claim in its
supplementary
affidavit and attached copies of the summons issued against Karis
Boerdery for the aforesaid amount and respondent’s
Deed of
Suretyship in favour of Absa.
[26]
In insolvency and winding up matters courts as a rule rely on reports
from the Master and trustees/liquidators which are presented
to them
without such reports having been attested to under oath. I
agree with the observations of Tsoka J in
Hannover Reinsurance
Group Africa (Pty) Ltd v Gungudoo
2012 (1) SA 125
(GSJ) at paras
[41] and [42]. I shall consider the reports
infra
when I
evaluate the evidence and submissions made by the parties.
Suffice to say at this stage that respondent could not
disregard the
two reports, especially the first and detailed one. He should
have responded thereto.
IX
SECTION 12
OF THE
INSOLVENCY ACT, 24 of 1936
[27]
Section 12
of the
Insolvency Act, 24 of 1936
reads as follows:
Final
sequestration or dismissal of petition for sequestration
(1)
If
at the hearing pursuant to the aforesaid rule
nisi
the
court is satisfied that-
(a)
the petitioning
creditor has established against the debtor a claim such as is
mentioned in subsection (1) of section
nine
;
and
(b)
the debtor has committed an act of insolvency or is insolvent; and
(c)
there is reason to believe that it
will be to the advantage of creditors of the debtor if his estate is
sequestrated,
it
may sequestrate the estate of the debtor.
(2)
If
at such hearing the court is not so satisfied, it shall dismiss the
petition for the sequestration of the estate of the
debtor and set
aside the order of provisional sequestration or require further proof
of the matters set forth in the petition and
postpone the hearing for
any reasonable period but not
sine
die
.
[28]
I t is evident from the wording of
s 12(1)
that the court has a
discretion to grant a final order for sequestration once the
applicant has proven the three requisites, but
in terms of
ss 12(2)
it must dismiss the application and set aside the provisional
sequestration order or require further proof and postpone the hearing
if it is not so satisfied as set out in
ss 12(1).
[29]
I shall adjudicate the issues flowing from
s 12
seriatim
in
the next paragraphs.
X
RESPONDENT’S
POINTS
IN
LIMINE
[30]
Respondent took four points
in limine
in respect of the
intervening application. I ruled that all issues be argued at
once and undertook to deal with the points
during my judgment on the
merits. I must say that Mr Du Preez did not, unlike the
remainder of his argument, enthusiastically
argue these issues.
Therefore I intend to be brief. The first point is that Cargill
is not entitled to intervene as
it is not a creditor. This
issue is dealt with in the next paragraph and nothing more needs to
be said at this stage.
Secondly, the authority of Cargill’s
deponent is attacked. Nothing turns on this. The deponent
presented facts
and it is not respondent’s case that she is not
au fait
with the facts. Respondent failed to make use of
rule 7
procedure, but in any event, Cargill made assurances doubly
sure and filed a further resolution and insofar necessary, to ratify
what has been done by its deponent. Thirdly, respondent relies
on Cargill’s alleged non-compliance with the statutory
requirements of the
Insolvency Act. At
the time when Cargill
lodged its application there were no more employees, save one.
At this stage failure to serve on such
employee is not a bar to
intervention. Proper security was provided prior to the hearing
of the application and the Master
issued the required certificate.
There is no merit in this point. The fourth point is one of the
old tricks of debtors
that find themselves in financial difficulty.
Respondent’s case is that reckless credit has been granted to
him.
This is a ridiculous argument by a person that boasts that
he is one of the largest maize farmers in the Province. This
averment
caused Cargill to attach the credit application with all
relevant documents in that regard to its replying affidavit.
The
application was properly considered on the facts presented to it
by respondent and if he misled the creditor, he should not be heard
to complain that Cargill should never have extended credit to him.
If it did not do so, respondent would not be able to plant
in the
hope of making R150m from his harvest as he wants the court to
believe he is used to. All these technical points taken
by
respondent fail.
XI
THE
LOCUS
STANDI
OF FNB AND CARGILL AS CREDITORS
[31]
There cannot be any doubt about FNB’s
locus
standi
as
creditor. Respondent bound himself as surety for the debts of
Karis Boerdery, subject to the limit of R75m plus interest
and costs,
and SRE Trust. Karis Boerdery owes FNB in excess of R92m plus
interest and costs and the amount owing by SRE Trust
is about R12m
plus interest and costs. Interest at the rate of 10.25%
per
annum
must be added on these amounts from 1 September 2017.
Respondent tried to indicate that FNB’s deponent contradicted
himself pertaining to the exact amount outstanding, but this is a
feeble attempt to distract the court’s attention from the
real
issue: he does not deny his liability to FNB in a total amount of
approximately R87m plus interest and costs. The certificates
of
indebtedness relied upon by FNB are not denied in paragraph 31 of the
answering affidavit. If interest alone is added
for a further
year, the outstanding amount would have increased to close to R100m.
Respondent made a bald statement without
any factual foundation that
FNB was not entitled to terminate the credit agreements with Karis
Boerdery and the SRE Trust.
This is unsustainable. See:
Wightman
t/a JW Construction v Headfour (Pty) Ltd and another
2008 (3) SA 372
(SCA) at para [13].
[32]
Respondent tried to show that no valid and binding credit agreement
was entered into with Cargill. It was never before
his
version. He was too keen to accept the credit provided and in
writing admitted liability in the amount of about R26m
earlier.
I refer to annexure “AA12” read with annexure “AA7”
to respondent’s answering affidavit
to FNB’s application
and his version at paragraph 5 of the answering affidavit to
Cargill’s application. However, when
the shoe pinched, he
firstly insisted that Cargill should provide him with all source
documents pertaining to the amount claimed
and then tried to avoid
liability in attacking the validity of the credit agreement. I
do no deem it necessary to consider
his version as it is nothing but
a smokescreen. Cargill provided clear and unambiguous evidence,
substantiated by documentation,
to show that a valid and binding
credit agreement had been entered into. It is clear that
respondent applied for credit from
Cargill and that he was granted
credit to allow him to plant and harvest his maize. Respondent
queried source documents and
even suggested that he had no knowledge
of drawings, which can only mean cash payments advanced to him,
mentioned in the statements.
Surely he should have played open
cards with the court in light of his earlier admission of liability.
I have reason to believe
that respondent deliberately caused smoke
and mirrors, but unfortunately this attempt failed.
[33]
Respondent, well knowing that he in writing admitted liability
towards Cargill in an amount in excess of R26m, averred that
his debt
has been settled. The
onus
was on him to prove this. See:
Pillay
v Krishna and another
1946 AD 946.
He stated the following in order to prove his
defence: In paragraph 12.15 of his answering affidavit to FNB’s
founding affidavit he stated that the shortfall equating to
approximately R19m has since been paid in full from firstly, the
remainder
of the harvested crops and secondly, from the proceeds of
an auction of redundant implements which was mandated by the
provisional
trustee. In paragraph 33.3 of the same affidavit he
stated that
“
there
is… no indebtedness to Cargill in view of the auction that has
taken place (as arranged by the provisional trustee)….”
In his answer to
Cargill’s founding affidavit he stated in paragraph 5.8 that he
could not substantiate the exact quantities
of maize delivered
pursuant to the Cargill agreement due to lack of documentation, but
then stated in the next sub-paragraph that
approximately 30 980
tons of maize were put in storage by him, challenging the trustees to
disclose who removed and received
same. In paragraph 6.5 of
this affidavit he suggested that
“
(t)o
the best of my knowledge there were still 30 980 tons of maize
available in the silo bags and silo on the farm, which
is more than
sufficient to fulfil my contractual obligations towards Cargill.”
[34]
Respondent’s version is as opaque as a typical Western Free
State sandstorm. He failed to persuade me. His
response
in this regard must be considered with the totality of the facts and
his version in particular. He is evasive throughout
his affidavits,
trying his best to point out alleged weaknesses in the cases against
him, but at the same time failing to show
what his assets are really
worth. I have referred to his opportunistic denial of Cargill’s
claim. He still insists
that he is one of the largest maize
farmers in the Free State who employees hundreds of permanent and
temporary employees, whilst
he has not been farming for more than a
year.
[35]
Cargill has clearly shown that respondent owes it R24 690 579.87
and it has not received settlement as alleged.
Respondent’s
version is so untenable that it can be rejected on the papers.
XII
ACTUAL
INSOLVENCY
[36]
The court must be satisfied at this stage of the proceedings
that FNB has proven the three requisites set out in
s 12
quoted
supra
on a balance of probabilities. The clearest proof of actual
insolvency is not required and such proof need not be direct.
The
following well-known and often repeated
dictum
of Innes CJ in
De
Waard v Andrew & Thienhaus Ltd
1907 TS 727
at 733 remains apposite:
“
To my mind the best proof of
solvency is that a man should pay his debts; and therefore I always
examine in a critical spirit the
case of a man who does not pay what
he owes.”
[37]
Bertelsmann
et
al
,
Mars:
The Law of Insolvency in South Africa
9
th
ed provides a convenient summary with reference to authorities at
para 5.34. I paraphrase from the summary with omission
of the
footnotes:
“
Instead
of or in addition to relying on the commission of an act of
insolvency by the debtor, the sequestrating creditor may rely
on the
fact that the debtor's estate is actually insolvent in that his
liabilities exceed his assets
.
This
factual state of affairs must be established on a balance of
probabilities.
To determine
whether a debtor is insolvent is often a very difficult matter,
especially as it has usually to be done on affidavits
without the
advantage of oral evidence. To establish insolvency it must be shown
that the debtor's liabilities as a fact exceed
his assets and not
merely that they might do so, and clear proof of this must be
adduced,
but
not necessarily the clearest proof.
Such proof need
not be direct. It is enough if facts are proved from which the
inference of insolvency is fairly and properly deducible.
As
far as the debtor is concerned, the best proof of his solvency is
payment of his debts and consequently his failure to pay is
itself of
significance,
particularly
if he fails to pay a judgment debt.
Thus
the facts that considerable debts are due and unpaid and that the
debtor has asked for time to pay, or has made default
in paying
by instalments, or has failed to pay interest on his
bond,….though not conclusive, are presumptive proof
of
insolvency…
……
.
If
the debtor's liabilities fairly valued exceed his assets fairly
valued he is insolvent, and in assessing liabilities merely
contingent debts are not included, whereas debts accrued but not yet
payable are included. If once it is shown that the debtor's
liabilities exceed his assets, it is not open for him to say that he
is not insolvent merely because he is in a position to pay
each
demand made on him as it comes in.
It is
established practice that all assets of the insolvent estate that are
to be liquidated in the process of obtaining a dividend
for the
creditors must be valued on the basis that they will be disposed of
at a forced sale. Such valuation must be effected by
a qualified and
experienced valuator who must present such valuation under oath. Only
cash and negotiable instruments, shares,
securities, bonds that are
sufficiently secured by the hypothecated property and articles such
as coinage that are traded at a
fixed or predetermined value need not
be assessed on the basis of a forced disposal…
…
Even
if the debtor shows that he is solvent the court can sequestrate his
estate on the ground that he has committed an act of insolvency
and
that sequestration will be to the advantage of creditors, if these
grounds are relied on in the application.
Whether or not
the debtor is in fact insolvent is decided on the balance of
probabilities. General insolvency may be proved
prima
facie
by
indirect means, the onus then shifting to the debtor to prove that
assets exceed liabilities. If he does so the onus again
returns to
the creditor, who might then furnish a sworn appraisement of assets
and liabilities. Goods purchased under an instalment
sale transaction
should figure in the list of movables hypothecated, with an
intimation of the terms under which they are held.
”
[38]
The
manner in which expert evidence must be placed before the court is
nothing new. Wessels JA put it as follows in
Coopers
(SA) (Pty) Ltd v Deutsche Gesellschaft
1976 (3) SA 352
(A) at 371G-H:
“
As I see
it, an expert’s opinion represents his reasoned conclusion
based on certain facts or data, which are either common
cause or
established by his own evidence or that of some other competent
witness. Except possibly where it is not controverted,
an
expert’s bald statement of his opinion is not of any real
assistance. Proper evaluation of the opinion can only
be
undertaken if the process of reasoning which led to the conclusion,
including the premises from which the reasoning proceeds,
are
disclosed by the expert.”
[39]
In
Botha
v Botha
4457/2016
[2016] ZAFSHC 194
(14 November 2016 at paras [18] –
[22] I made some scathing remarks pertaining to so-called valuations
obtained in friendly
sequestrations in order to prove an advantage to
creditors and also referred to several similar remarks by colleagues
in other
Divisions. Mr Du Preez referred me to this judgment,
but my remarks are not applicable
in
casu
,
save insofar as the valuations are not under oath. Unlike
Botha
and other friendly sequestration and voluntary surrender applications
referred to in the judgment, we are here concerned with a
compulsory
and hostile sequestration in the true sense of the word between
parties who contracted with each other at arms’
length.
[40]
In
casu,
the
valuations have been obtained at the request of respondent and/or his
agent, an attorney and auctioneer. Respondent also
paid for the
services rendered. In fact, respondent is quite keen to use the
valuer’s valuations in an attempt to show
his solvency,
notwithstanding the criticism by Dr DGB Boshoff, a person who holds
himself out as an expert in valuation of properties.
He failed
to provide his own valuations and in my view his criticism is
abstract, theoretical, highly technical and consequently
meaningless.
Mulder’s valuations, although not under oath and generally
speaking inadmissible evidence, are common cause
and acceptable in
the circumstances, it being obtained by respondent and even attached
to the answering affidavit. The market
value, and not the
forced sale value, arrived at by the valuer were found to be
acceptable by respondent, although his counsel
suggested during
argument that the market values arrived at in respect of the various
farms should be increased to R50 000.00
per hectare, based on a
recent sale relied on by respondent. If this is done, and with
acceptance of Mulder’s valuations
in all other aspects, the
total value of all farms should increase by R15m.
It
must be mentioned that Mulder valued the properties at market values
ranging from R30 000.00 to R45 000.00 per hectare
and in
each instance gave a meaningful and cogent explanation for arriving
at a particular figure.
Save
for the submissions by his counsel, respondent’s only basis for
rejecting the case presented by FNB is the acceptance
by the bank of
the forced sale values arrived at by the valuer.
[41]
The valuer dealt with relevant facts and presented cogent reasons for
the conclusions arrived at. His valuations cannot
be seen as
“
an
exercise in futility”.
In
fact, his reports are well reasoned and clearly not a
“
copy
and paste”
piece
of work. The attributes of the individual farms were considered
and he explained with reference to the type of farm
land and
improvements together with comparable sales how and why he arrived at
his valuations. FNB elected to rely in its
founding affidavit
on a summary of the forced sale values arrived at by the valuer, but
made it clear that the full valuations
were available for
inspection. Bearing in mind the acceptable definition of
“
forced
sale”
value,
there can be little doubt, save for the observations
infra,
the liquidation of assets during insolvency falls within such
definition. The trustees of insolvent estates must liquidate
the assets as soon as possible and do not have funds and/or the
luxury of renovating or improving properties to get them market-ready
and/or of keeping them on the market for six to twelve months, making
use of several estate agents who are all of them too willing
to
advertise the property to the best of their ability. However,
as stated
infra,
and
without detracting from the cogency of reliance on
“
forced
sale”
values,
I shall consider the application based on the market value of the
respondent’s assets.
[42]
Mr Du Preez submitted that the two applications are
“
bankrupt”
and not his client.
He argued that the Absa claim was instituted against Karis Boerdery
on 24 July 2018 and long after respondent
delivered his answering
affidavit. There is also no claim against respondent in his
personal capacity. Respondent did
not play open cards with the
court. He was supposed to provide a full picture of all his
assets and liabilities. Surely,
he should have been fully aware
of his and Karis Boerdery’s indebtedness towards Absa Bank when
he deposed to his affidavit.
[43]
Mr Du Preez insisted that I should consider the case based on the
factual position when the provisional sequestration application
served before the court and the same should apply pertaining to the
intervening creditor’s application,
i.e.
it must be adjudicated as on the date when the rule
nisi
was issued more than a year ago. He also submitted that FNB did
not make out a case in its founding affidavit and now endeavours
through its counsel to make a quantum leap, relying on insolvency by
inference, whilst all the time relying on actual insolvency.
The
authorities are clear. An applicant is not prevented from
relying on inferences in order to prove actual
insolvency.
[44]
Respondent insists that his financial position must be considered
based on movable assets valued at about R69m, notwithstanding
clear
proof to the contrary. He is intentionally trying to mislead
the court in this regard. His attorney and auctioneer
and
Cargill’s attorney did an investigation of the movable assets
and it eventually appeared that the valuation of R69m was
hopelessly
wrong and based on incorrect information fed to the valuer and relied
upon by FNB when it brought the application.
I refer to the
common cause facts set out
supra
and do not intend to repeat same.
[45]
I am prepared to accept that in adjudicating whether respondent is
insolvent or not, the fair value of his assets should be
accepted and
this means the market value thereof. See:
Mars
su
pra
and
Uys
& Weyers NNO v CMW Lewendehawe (Pty) Ltd
,
case no A258/2011, an unreported judgment of the full bench of this
Division delivered on 15 December 2011 and authorities quoted
at para
[3]. In para [4] the full court criticised the suggestion in
Mars that the court should consider the forced sale
values of
properties. Mr Badenhorst did not try to persuade me to accept
the forced sale values in order to establish whether
or not
respondent is insolvent, but submitted with much force that even if
the market values are accepted, respondent is factually
insolvent.
[46]
Mr Zietsman on behalf of Cargill presented me with detailed summaries
of the respondent’s financial position according
to FNB and his
client based on the facts presented by the parties. He also
relied on respondent’s own version as set
out in paragraph 8 of
the answering affidavit to FNB’s application. According
to respondent his liabilities amounted
to approximately
R147 418 835.00 as at date of the provisional order.
He denied owing Cargill any amount and claimed
that Laeveld
Agrochem’s claim should be reduced to R8m. Absa Bank’s
claim of R7.5m was not taken into consideration
and also not
Cargill’s claim of R24 690 579.87. According to
Mr Zietsman’s calculations which appear
to be correct,
respondent’s total liabilities amount to R179 609 130.30.
The total assets, inclusive of immovable
properties at market value
and the movable assets of just over R1m, amount to R121 336 412.92,
leaving a shortfall of
R58 272 717.38 if FNB and Cargill
are correct in respect of respondent’s debts.
[47]
Insofar as respondent’s calculations are concerned, he misled
the court in respect of the value of his movables
in order to show
that his assets exceed his liabilities by R18 692 862.00 if
the creditors’ claims as stated by
FNB and Cargill
(R170 926 451.76) are accepted. On his version his
assets amount to R189 622 313.00 which
includes movables of
R69m. This is incorrect. Even if the valuations of the
immovable properties are increased by R15m
as Mr Du Preez submitted
should be done, respondent is still insolvent based on his admission
of debts in the amount of R147 418 835.04.
This is so
because if the sum of all assets is increased from R121 336 412.92
with R15m, one arrives at a total of R136 336 412.92,
leaving a shortfall of more than R11m.
[48]
I am satisfied that FNB has proved on a balance of probabilities that
respondent is insolvent. Even if there might be any doubt
in this
regard, insolvency has been proved by way of inference from the
following proved facts: (1) respondent has failed to settle
the debts
of two major creditors, (2) other creditors have attached movable
properties sold in terms of instalment sale contracts,
(3) respondent
ceased farming activities more than a year ago (unless he is actually
conducting same in the name of the Luna trust
of which his wife is a
trustee), 4) respondent resorted to improper conduct and breach of
contract by disposing of 8 800 tons
of maize to the value of
over R13m which belonged to and was to be delivered to Cargill –
he apparently act as such
in order to stabilise his cash flow
and/or to settle other debts - 5) respondent advertised his immovable
and movable properties
for sale without the prior consent of secured
creditors, indicating an acknowledgement that he could not continue
with normal farming
activities and 6) more than a year has lapsed
since the provisional order of sequestration. In doing so, no
quantum leap
has taken place as Mr Du Preez accused FNB of doing.
Factual insolvency may be established indirectly as stated in
Mars
supra.
See
also:
Cohen
v Jacobs (Stand 675 Dowerglen (Pty) Ltd intervening)
[1998] 2 All SA 433
(W) at para [51].
[49]
Absa
Bank Ltd v Rhebokskloof (Pty) Ltd and others
1993 (4) SA 436
(C) is also a typical case in point in order to rely
on insolvency by way of inference. Much weight should be
attached to
a respondent’s unexplained failure to pay his
debts. The learned judge dealt with this aspect at 446H –
447D,
relying on the
dictum
of Innes CJ, mentioned
supra
.
[50]
In conclusion on this topic, respondent had sufficient time to settle
his admitted debt, but failed to do so. The best
proof of
solvency is to settle one’s debts. Respondent, through
his wife’s trust, had a great opportunity to
plant and harvest
maize during the 2017/2018 season in order to make a substantial
profit. A mere R3.2 was paid as rental
to the trustees for the
immovable properties. On respondent’s version he is used
to making R150m profit from his annual
harvests. Although his
wife’s trust is a separate entity, I would have thought that
he, as the
de facto
farmer on all probabilities, would have
arranged that some of the proceeds of the harvest be utilised to
settle his debts to keep
the wolf from the door and to avoid final
sequestration.
XIII
DEEDS
OF INSOLVENCY
[51]
FNB
and Cargill rely on several grounds of insolvency committed by
respondent in terms of
s 8
(c) and/or 8 (d) of the
Insolvency Act.
These
two subsections read as follows:
“
8.
A
debtor
commits an act of insolvency-
(c)
If he makes or attempts to make any disposition of any of his
property which has or would have the effect of prejudicing his
creditors
or of preferring one creditor above another;
(d)
if
he removes or attempts to remove any of his property with intent to
prejudice his creditors or to prefer one creditor above another;”
[52]
In the case of
s 8
(c) the deed of insolvency is committed when the
debtor disposes of or attempts to dispose of his property which has
or would have
the effect of prejudicing his creditors or preferring
one above another. In the case of
s 8(d)
the removal or
attempted removal of his property by a debtor with the intent to
prejudice creditors or prefer one above the other
is a deed of
insolvency. In the first instance intent is not relevant and in
the second instance a disposition does not have
to be proven,
although the debtor’s intent must be proven.
[53]
The contractual construction relied upon by Cargill is to the effect
that it becomes the owner of the maize upon harvesting.
Therefore, respondent’s counsel submitted that any disposition
of the 8 800 tons of maize could never be a deed of insolvency
as respondent did not dispose of his property. In fact, Mr Du
Preez argued that on a proper interpretation of the contract
between
the parties, insofar as it could be found to be valid and binding
which respondent put in dispute, respondent was not even
contractually bound to deliver all maize harvested and in particular
the 8 800 tons to Cargill. Mr Badenhorst on behalf of
FNB
submitted that the disposition of the maize fell within the
parameters of
s 8(c)
or
s 8(d)
, whilst Mt Zietsman presented an
interesting argument. He submitted that the Cargill contract
makes it clear that respondent
was obliged to deliver the 8 800
tons of maize, that he failed to do so, resulting in respondent
stealing Cargill’s
maize in order to become owner thereof
whereupon he disposed of the maize as owner to third parties to the
prejudice of his creditors
and Cargill in particular, alternatively
that he removed the maize with the intent as set out in
s 8(d).
In the light of the conclusion arrived at pertaining to actual
insolvency, I deem it not necessary to consider these arguments
further.
[54]
FNB relies on further deeds of insolvency. According to it
respondent could not obtain finance from a third party and
allow
registration of a special notarial bond over his movables in favour
of Cargill, bearing in mind the terms of the credit agreement
entered
into between Karis Boerdery and FNB to which respondent was a
signatory, he having represented Karis Boerdery. He
also
entered into a Deed of Suretyship with FNB in respect of the
principal debtor’s debt subject to a limit of R75m.
Mr Du
Preez submitted that Karis Boerdery, and not respondent, made such
undertaking to FNB and therefore, respondent’s application
for
credit and granting of credit facilities by Cargill can never be a
deed of insolvency in terms of
s 8(d)
by respondent. It is also
FNB’s case that respondent attempted to dispose of his assets
by selling same by public auction
without the consent of his
creditors and FNB in particular. Respondent disputes that he
intended to sell his assets without
such consent. Again, for
the reason mentioned previously, I deem it not necessary to
adjudicate these disputes.
XIV
ADVANTAGE
TO CREDITORS
[55]
The court must be satisfied that there is reason to believe that
sequestration of respondent will be to the advantage of his
creditors. Generally, creditors’ views are important and
they know what is in their best interests.
In
casu
FNB
is by far the biggest creditor and it insists that the third
requirement for a final order of sequestration has been proven
on a
balance of probabilities. Cargill is a substantial creditor and
its views cannot be ignored. There is no indication
that any
creditor is against the granting of a final sequestration order.
[56]
Williamson JP said the following in
Realizations
Ltd v Ager
1961 (4) SA 10
(D & C.L.D.) at 14H in respect of the advantages
attached to an investigation of the insolvent’s affairs: “
The
best judges of their interest in this regard are the creditors.”
Respondent
has in my view already obtained a moratorium of over a year which is
unheard of. The sequestration proceedings
should have been
finalised many months ago. The major creditors seek a final
order now and such order will be to their advantage.
[57]
I have reason to believe that the trustees to be appointed may be
able to trace further assets. One aspect not considered
by any
of the two creditors is respondent’s allegation in his
management statements of 2016, presented to Cargill when applying
for
credit during 2017, a few months before the provisional sequestration
order, that he was the owner of nearly three hundred
cows to the
value of about R4m. Only a few cows were found after his
provisional sequestration. Respondent has much
to explain in
this regard. The same applies to the 8 800 tons of maize
which he admitted disposing of, either to pay
other creditors or for
his personal use, as well as more than 30 000 tons which on his
version should have been on the farms
when he was provisionally
sequestrated.
[58]
I therefore agree with FNB that there is a reasonable prospect that
the trustees will be able to unearth further assets
which will yield
a pecuniary benefit to creditors. Respondent also had deals
with Maree and Bernard attorneys which should
be further
investigated. It may be found that certain creditors were
unduly benefitted to the disadvantage of others.
We also know
now that several movable properties such as farming equipment listed
on respondent’s inventory could not be
found after the
provisional order was granted. An investigation may yield
positive results for creditors. Anyone of
sections 26
,
29
to
31
of the
Insolvency Act may
be invoked.
XV
DISCRETION
OF THE COURT
[59]
As indicated, even if a creditor has proved all three requisites set
out in
s 12
, the court still has a discretion not to grant a final
order of sequestration. There is no hope that respondent will
be able
to get out of his financial predicament. A postponement
of the matter, serving as some sort of moratorium will be of no
assistance.
If the application is to be dismissed, Cargill
would be entitled to a fresh provisional order in its favour.
This will cause
unnecessary further delay which will not serve any
purpose, and most importantly, will not present respondent with a
realistic
opportunity to settle his debts.
XVI
CONCLUSION
[60]
I am satisfied that FNB has made out a proper case for a final order
of sequestration. Respondent is insolvent
and I have sufficient
reason to believe that a final order will be to the advantage of his
creditors. I have considered whether
to exercise my discretion
against granting final relief, but this would be a futile exercise.
[61]
Cargill’s application to intervene caused the papers to become
voluminous, but in my view the factual information provided
by it
together with respondent’s feeble attempts to justify his
opposition presented more certainty in respect of respondent’s
financial collapse and inability to escape the consequences thereof.
Cargill shall be entitled to its costs and both FNB
and Cargill shall
be entitled to the fees of senior counsel.
XVII
ORDERS
[62]
1.) The rule
nisi
issued on 4 October 2017 is confirmed and Sarel Jacobus van der Walt
is hereby finally sequestrated.
2.) The applicant’s
costs of the application as well as Cargill RSA (Pty) Ltd’s
costs in respect of the intervening
application, such costs to
include in both instances the fees of senior counsel, shall be costs
in the sequestration.
______________
J
P DAFFUE, J
On
behalf of Applicant: Adv MA Badenhorst SC
Instructed
by:
RWL
Attorneys
c/o
Symington & De Kok
Bloemfontein
On
behalf of Respondent: AdvV DB Du Preez SC and U Lottering
Instructed
by: MJ Lombard Inc
c/o
Huggett Retief Inc
Bloemfontein
On
behalf of Intervening Creditor: Adv P Zietsman SC
Instructed
by: Gerrit Coetzee Attorneys
c/o
Horn & Van Rensburg Attorneys
Bloemfontein